New Mexico - National Council on Compensation Insurance · Guest Speaker: Darin hilders, New Mexico...

© Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved.

New MexicoNovember 2, 2017

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New Mexico State Advisory Forum

▪ Annual Issues Symposium (AIS): Bill Donnell Video Excerpt

▪ Countrywide Workers Compensation System

▪ New Mexico’s Workers Compensation System

▪ Countrywide and New Mexico Labor Markets

▪ Legislative Issues: Countrywide and New Mexico

▪ Guest Speaker: Darin Childers, New Mexico Workers’ Compensation Administration

▪ Emerging Issue: 2017 Medical Marijuana Update

▪ Residual Market: Countrywide and New Mexico

▪ Q & A

2


AIS State of the LineVideo Excerpt

Bill Donnell NCCI President and CEO


CountrywideWorkers Compensation System


After five years of growth, premium is flat in the most recent year

The combined ratio continues to show favorable results

Frequency declined again at the latest point

Medical and indemnity severity increased modestly

CountrywideWorkers Compensation (WC) System—

An Overview

5


WC Net Written PremiumPrivate Carriers and State Funds

6

p PreliminarySource: NAIC’s Annual Statement data; includes state insurance fund data for the following states: AZ, CA, CO, HI, ID, KY, LA, MD, MO, MT, NM, OK, OR, RI, TX, and UTEach calendar year total for state funds includes all funds operating as a state fund in that year

37.8 39.7 40.1

47.845.5 45.5

0

10

20

30

40

50

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16p

$ Billions

Calendar Year

State Funds ($B)

Private Carriers ($B)


WC Direct Written Premium (DWP)Change by Component

Private Carriers—NCCI States

7

Sources: DWP Change: NAIC’s Annual Statement Statutory Page 14 for all states where NCCI provides ratemaking services Components: NCCI’s Policy data

2016 vs. 2015

-0.8%

+1.0%

-1.4%

-2.7%

+4.0%

State Fund Conversion to Private Carrier

Payroll

Loss Cost and Mix

Carrier Discounting

Other Factors

Change in Direct Written Premium: 0.0%


Increases in Payroll Continue to Drive Premium Growth

Forecast Change 2015–2016

8

Sources: Moody’s Analytics and NCCI

+2.5%

WageRate

+4.5%

Payroll

-1%

0%

1%

2%

3%

4%

Prof. &BusinessServices

Trade,Transport.,& Utilities

Education& HealthServices

Manufac-turing

FinancialActivities

Construc-tion

Leisure & Hospitality

All Other-1%

0%

1%

2%

3%

4%

Prof. &BusinessServices

Trade,Transport.,& Utilities

Education& HealthServices

Manufac-turing

FinancialActivities

Construc-tion

Leisure & Hospitality

All Other

+1.9%

Employment


WC Approved Changes inBureau Premium LevelBy Effective Year for NCCI States

9

p PreliminarySource: NAIC’s Annual Statement Statutory Page 14Bureau premium level changes reflect approved changes in advisory rates, loss costs, assigned risk rates, and rating values, as of 5/12/2017, relative to those previously approved in NCCI states onlyIN and NC are filed in cooperation with state rating bureaus

-2.5

-6.7

-10

-5

0

5

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17p

Percent

Calendar Year


WC Impact of Discounting on PremiumPrivate Carriers—NCCI States

10

p PreliminarySources: NAIC’s Annual Statement Statutory Page 14 and NCCI’s Financial Call data NCCI benchmark level does not include a profit and contingency provision or expense constantBased on data for all states where NCCI provides ratemaking services, excluding TX

2.60.5

-25

-15

-5

5

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16p

Percent

Policy Year


WC Impact of Discounting on PremiumPrivate Carriers—NCCI States

11

p PreliminarySources: NAIC’s Annual Statement Statutory Page 14 and NCCI’s Financial Call data Dividend ratios are based on calendar year statisticsNCCI benchmark level does not include a profit and contingency provision or expense constantBased on data for all states where NCCI provides ratemaking services, excluding TX

Rate/Loss Cost Departure

Schedule Rating

Dividends

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16p

Policy Year


WC Combined Ratio—Underwriting Gain Achieved

Private Carriers

12

p PreliminarySource: NAIC’s Annual Statement data

3% lower

94 94

85

90

95

100

105

110

115

120

125

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16p

Percent

Calendar Year


WC Combined Ratio ComponentsPrivate Carriers

13

p PreliminarySource: NAIC’s Annual Statement data

Loss Ratio

Loss Adjustment Expense (LAE) Ratio

Underwriting Expense Ratio

Percent

Calendar Year

Dividends

54 53

14 14

25 25

1 1

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16p


WC Net Combined RatiosCalendar Year vs. Accident Year As Reported

Private Carriers

14

p PreliminarySource: NAIC’s Annual Statement dataAccident Year information is reported as of 12/31/2016Includes dividends to policyholders

94 9496

98

80

90

100

110

120

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016p

Percent

Calendar Year

Accident Year

© Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved. 15

2010 and 2011 adjusted primarily for significant changes in audit activityp Preliminary based on data valued as of 12/31/2016Source: NCCI’s Financial Call data, developed to ultimate, premium adjusted to current wage and voluntary pure premium level, excludes high-deductible policies; based on data through 12/31/2015Values displayed reflect the methodology underlying the most recent rate/loss cost filingIncludes all states where NCCI provides ratemaking services; WV is excluded through 2011

-4.6-4

-10

-5

0

5

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16p

Percent

Accident Year

Average Annual Change: –3.6%(1995–2015)

WC Lost-Time Claim FrequencyChange in Lost-Time Claims per $1M Pure Premium

Private Carriers and State Funds—NCCI States


WC Average Indemnity Claim SeverityPrivate Carriers and State Funds—NCCI States

16

p Preliminary based on data valued as of 12/31/2016Source: NCCI’s Financial Call data, developed to ultimate, excludes high-deductible policies; based on data through 12/31/2015Values displayed reflect the methodology underlying the most recent rate/loss cost filingIncludes all states where NCCI provides ratemaking services; WV is excluded through 2007

$2

3.2

$2

3.9

+0.9%+3%

5

10

15

20

25

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16p

Severity ($ Thousands)

Accident Year


Relative Growth Rates—Indemnity Severity vs. Wage Inflation


17

p Preliminary based on data valued as of 12/31/2016Sources: Severity: NCCI’s Financial Call data, developed to ultimate, excludes high-deductible policies; based on data through 12/31/2015Values displayed reflect the methodology underlying the most recent rate/loss cost filingIncludes all states where NCCI provides ratemaking services; WV is excluded through 2007US Average Weekly Wage: 1995–2007 and 2012–2015, Quarterly Census of Employment and Wages; 2008–2011, NCCI; 2016p, NCCI and Moody’s Analytics

Change inIndemnity Severity in Excess of Wage Inflation

Change in Wage Inflation

Change in OverallIndemnity Severity

1995 to 2001 2009 to 2016p2002 to 2008

+32%

+33%

+25%

+9%

+19%

-12%

+65%

+34%

+7%


WC Average Medical Lost-Time Claim SeverityPrivate Carriers and State Funds—NCCI States

18

p Preliminary based on data valued as of 12/31/2016Source: NCCI’s Financial Call data, developed to ultimate, excludes high-deductible policies; based on data through 12/31/2015Values displayed reflect the methodology underlying the most recent rate/loss cost filingIncludes all states where NCCI provides ratemaking services; WV is excluded through 2007

$2

7.7

$2

9.1

-1.4%+5%

5

10

15

20

25

30

35

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16p

Severity ($ Thousands)

Accident Year


Changes in Medical Lost-Time Claim Severity by Component


19

p Preliminary based on data valued as of 12/31/2016Sources: Severity: NCCI’s Financial Call data, developed to ultimate, excludes high-deductible policies; based on data through 12/31/2015Values displayed reflect the methodology underlying the most recent rate/loss cost filingIncludes all states where NCCI provides ratemaking services; WV is excluded through 2007Centers for Medicare & Medicaid Services: Personal Health Care Chain-Weighted Price Index

Change in theMedical UtilizationComponent

Change in the Medical Price Component

Change in OverallMedical Severity

1995 to 2001 2009 to 2016p2002 to 2008

+16%

+56%

+20%

+27%

+12%

+2%

+72%

+47%

+14%


New Mexico’s Workers Compensation System


New Mexico’sWorkers Compensation System—

An Overview

Premium volume declined for the

first time in several years

Combined ratios have been

stable in the recent past

Lost-time claim frequency

decreased again

Indemnity and medical severity decreased in the

latest year

21

22© Copyright 2017 National Council on Compensation Insurance, Inc. All Rights Reserved.

280.4261.5

231.9217.6

230.7

251.7

272.8291.4 296.1

269.1

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Source: NAIC’s Annual Statement data

Calendar Year

New Mexico Workers CompensationPremium Volume

Direct Written Premium in $ Millions


New Mexico Accident Year Combined Ratios by Component

Sources: NCCI’s financial data through 12/31/2016 and NAIC’s Annual Statement data

73%

55% 53% 49% 49%

39%

37% 36%35% 36%

0%

0% 0%0% 0%

113%

92% 89%84% 85%

2012 2013 2014 2015 2016

Loss Ratio Expense Ratio Dividend Ratio

Accident Year

23


Impact of Discounting onWorkers Compensation Premium

in New Mexico

5%

20%18%

21%

13%

12%14%

16% 16%

11%

2%4%

7% 7%5%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Policy Year

Dividends Schedule Rating Rate/Loss Cost Departure

Based on data through 12/31/2016Dividend ratios are based on calendar year statistics

Percent


New Mexico Workers Compensation Lost-Time Claim Frequency

Percent Change in Lost-Time Claims

Based on NCCI’s financial data through 12/31/2016, developed to ultimate, premium adjusted to common wage level

-2.8%

-6.1%

-14.6%

-6.4%

6.7%

-10.9%

-1.7%

0.5%

-1.2%

-7.4%

-4.1%

-8.3%

-4.7% -5.3%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Cumulative Change of –50.2%(2001–2015)

PercentChange

Policy Year

25


$1

8.4

$1

8.0

$1

8.6

$2

0.7

$2

1.0

$2

3.6

$2

4.5

$2

3.8

$2

3.1

$2

3.7

$2

3.8

$2

5.9

$2

6.0

$3

0.1

$2

6.7

-1.9% 3.2%

11.1% 1.5%

12.3%3.9% -2.7% -3.0% 2.3% 0.4%

9.1% 0.3%

15.9%

-11.3%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Policy Year

New Mexico Average Indemnity Claim SeverityLost-Time Claim Severity in $ Thousands

Based on NCCI’s financial data through 12/31/2016, on-leveled and developed to ultimate

Cumulative Change of +45.3%(2001–2015)


$2

6.1

$2

3.7

$2

9.0

$3

0.4

$3

2.4

$3

3.4

$3

6.6

$3

6.5

$3

7.5

$3

7.9

$3

7.4

$4

0.8

$3

6.7

$4

1.3

$3

7.9

-9.1%

22.2%4.9%

6.5%3.2%

9.6% -0.3% 2.7% 1.2% -1.4%

9.1%

-10.0%

12.3%

-8.2%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Policy Year

New Mexico Average Medical Claim SeverityLost-Time Claim Severity in $ Thousands

Based on NCCI’s financial data through 12/31/2016, on-leveled and developed to ultimate

Cumulative Change of +45.2%(2001–2015)


4.0%2.3%

-6.2%

-9.0%

-16.2%

2.2% 3.3%

-6.2%-7.0% -7.5%

1/1/2014 1/1/2015 1/1/2016 1/1/2017 1/1/2018

Voluntary Assigned Risk

New Mexico Filing Activity Voluntary Loss Cost and Assigned Risk Rate Changes


New Mexico January 1, 2018 Loss Cost Filing

Overall Loss Cost Level Change: –16.2%

Change in Experience:

–13.5%

Change in Trend: –4.4%

Change in Benefits:

0.6%

Change in All Other:

0.7%

29


New Mexico January 1, 2018 Filing—Average Changes by Industry Group

Manufacturing: –17.1%

Miscellaneous: –15.5%

Office & Clerical: –16.5%Contracting: –15.4%

Overall Change: –16.2%

Goods & Services: –17.0%

30


Current NCCI Voluntary Market Loss Cost/Rate Level Changes

Excludes Law-Only Filings-1

6.3

-16

.2 -14

.0

-13

.3

-13

.0

-12

.8

-11

.3

-10

.9

-10

.7

-10

.3

-9.8

-9.4 -8.7

-8.4

-7.9

-7.8

-7.8

-7.6 -6

.4 -5.8 -4

.6

-4.5

-4.3 -3

.0 -1.0

-0.5

-14

.1

-13

.9

-12

.7

-12

.6

-9.3 -7

.9

-7.6 -6

.2

-6.0

-3.0 -1

.7

1.1

-25

-20

-15

-10

-5

0

5

10

15

OKNM CT OR AL NHMD IN CO TN NC IL NVWV LA UT FL IA AR AK VT MT TX KS NE AZ SC MS ID KY RI ME DCMO HI SD GA VA

Approved Pending

Reflects the most recent experience filing in each jurisdiction as of 10/20/2017 Due to the timing of the individual loss cost/rate filings, the figures shown may include changes from prior filing seasons

Percent


Current Voluntary Market Rates/Loss CostsWestern NAIC Zone

Hawaii* 1/1/18 –1.7%

Idaho 1/1/18 –5.8%

Arizona 1/1/18 –6.4%

Montana 7/1/17 –7.8%

Texas 7/1/17 –7.8%

Alaska* 1/1/18 –7.9%

Utah 12/1/17 –9.4%

Nevada 3/1/17 –10.7%

Colorado* 1/1/18 –12.7%

Oregon 1/1/18 –14.0%

New Mexico 1/1/18 –16.2%

32

*Pending


1.16

1.01

1.37

0.55

0.830.78

1.24

NM AZ CO TX UT Region Country

Current Average Voluntary Pure Loss Costs Using New Mexico Payroll Distribution

Pure Loss Cost—All Classes

Based on the latest NCCI approved rates and loss costs in the various states


A Cautionary Tale:The Danger of Comparing Average Loss Costs Across States


Countrywide and New Mexico Labor Markets


National Economic Highlights and Their Impacton Workers Compensation

36

National Economic IndicatorPotential Impact on the Workers Compensation Market

Private employment growth is expected to continue to slow

The impact on payroll and premium will also slow

Wage growth is poised to accelerate Upward pressure on payroll and premium as well as indemnity severity

Medical inflation is forecasted to slowand then reaccelerate

Increases in medical costs per claim

Interest rates are still low but expectedto increase

Investment income will likely remain muted this year but increase as interest rates rise


Change in Private EmploymentPrivate Employment Growth Is Below Average

Year-on-year percentage change; employment is for Total Private IndustryFrequency of observation: quarterly; latest available data point: 2017 Q1 Sources: US Bureau of Labor Statistics, Moody’s Analytics, and NCCI

2.0

0.5

1.0

2.5

2.1

1.7

0

1

2

3

2015Q1 2016Q1 2017Q1

New Mexico United States

Percent

37


Change in Average Weekly WagesWage Growth Is Below the Rest of the Nation

Year-on-year percentage change; wages are for Total Private IndustryFrequency of observation: quarterly; latest available data point: 2017 Q1Sources: US Bureau of Labor Statistics, Bureau of Economic Analysis, Moody’s Analytics, and NCCI

1.2

0.3

1.1

2.42.3

2.1

0

1

2

3

2015Q1 2016Q1 2017Q1


Percent

38


2017 Q1 year-on-year percentage change; AWW = Average Weekly WageSources: US Bureau of Labor Statistics, Bureau of Economic Analysis, Moody’s Analytics, and NCCI

+1.0%

+1.7%

+1.1%

+2.1%

+2.2%

+3.9%

Employment

AWW

Payroll

0

1

2

3

4


Percent

Private Industry Payroll Growth DecompositionPayroll Growth Is Lower Than the Nation


Employment numbers are rounded to the nearest hundredYear-on-year percentage change; frequency of observation: quarterly; latest available data point: 2017 Q1 Sources: US Bureau of Labor Statistics, Moody’s Analytics, and NCCI

NM +2.5 140,600 17 +3,400US +2.4

NM +3.4 98,100 12 +3,200US +1.9

NM +1.4 101,600 12 +1,300US +3.1

NM +2.6 30,000 4 +800US +1.0

NM +1.6 45,000 5 +700US +2.8

NM +4.4 12,700 2 +500US –0.9

NM +0.1 33,500 4 +0US +2.2

NM –0.1 138,800 17 –200US +1.0

NM –0.4 190,800 23 –800US +0.8

NM –3.5 26,400 3 –900US +0.0

NM –9.9 21,900 3 –2,400US –2.1

Natural resources and mining

Industrial Sector

Education and health services

Leisure and hospitality

Professional and business services

Other services

Manufacturing

Financial activities

Trade, transportation, and utilities

Government

Construction

Information

1-Year

ChangeYear-Over-Year Percent Change, 2017Q1

Sector

Size

%

Share

Change in Employment by IndustryEmployment in Several Industries Has Increased in the Past Year


–10% 0 +10%

Payroll Growth

–10% 0 +10%

AWW Growth

New Mexico’s Payroll Growth Decomposition by Sector

–10% 0 +10%

Government

Professional and business services

Education and health services

Trade, transportation, and utilities

Construction

Leisure and hospitality

Financial activities

Natural resources and mining

Manufacturing

Other services

Information

Employment Growth

41

2017 Q1 year-on-year percentage change; AWW = Average Weekly Wage; sectors are in descending order by the volume of state payroll amountsSources: US Bureau of Labor Statistics, Bureau of Economic Analysis, Moody’s Analytics, and NCCI

≈+


Headline Unemployment RateThe Unemployment Rate Is Higher Than the National Rate

42

Headline Unemployment Rate, seasonally adjusted Frequency of observation: monthly; latest available data point: July 2017Source: US Bureau of Labor Statistics (BLS), www.bls.gov

US: 4.3%

NM: 6.3%

0

1

2

3

4

5

6

7

8

Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul

2016 2017

Percent


New Mexico’s Labor Market

▪ New Mexico’s unemployment rate is above the US rate

▪ Payroll growth in New Mexico is lower than the nation, driven by below-average growth in both employment and average weekly wages

▪ Payroll has grown in all but two sectors

▪ The Information sector posted the fastest growth, driven by strong gains in both average weekly wages and employment

▪ Average weekly wages have declined in four sectors

▪ Employment growth is below the US rate

▪ Both the Education and Health Services and the Leisure and Hospitality sectors added a large number of jobs

▪ Natural Resources and Mining experienced a severe decline

▪ Three other sectors also experienced declines in employment

43


Legislative Issues: Countrywide and New Mexico


2017 Countrywide Overview

Countrywide, legislative activity has increased over prior years both in volume and content.

Regulation changes so far concern medical cost management, claim handling, and effectuating enacted legislation.

Year to date, there has been about the same number of workers compensation-related cases at the state supreme court level as there were in 2016.

The 2016 general election resulted in a net gain for Republicans in state government, where they now control both chambers of the legislature and the governor’s office in 26 states.

45


2017 Workers Compensation Legislative Activity

46

As of 7/1/2017

0–10 Bills Introduced 11–20 Bills Introduced 21–30 Bills IntroducedMore Than 30 Bills

Introduced

CA

ORID

WA

MT

NV

AK

UT

AZ

CO

NM

WY

TX

OK

KS

NE

SD

ND

MN

IA

MO

AR

LA

IL

WI

MI

IN OH

MS AL GA

FL

TN

KY

SC

NC

VA

WV

PA

NY

NJ

ME

VT

NH

MD

DE

CTRI

DC

MA

HI


Key Workers Compensation-Related Themes in Introduced Legislation

▪ First Responder Presumptions

▪ Indemnity Benefits

▪ Medical Cost Management

▪ Definitions

47


Federal Emerging Issues

Regulation of Air Ambulance

Services

Sen. Jon Tester (MT) introduced legislation

to provide state authority

Federal Aviation Administration Reauthorization

Social Security Disability

Insurance (SSDI) Reform

SSDI Solutions Initiative

recommendations

Trump Administration SSDI

Reverse Offset Proposal

MedicareSet-Aside (MSA)

Reform

Legislation to be introduced to bring greater efficiency to

MSA Process

CongressionalBudget Office

scoring

48


Guest Speaker:Darin Childers, WCA Director


Emerging Issue:

The Legalization ofMarijuana and ItsImpact on Workers Compensation



State Activity

51

29 8Plus Washington, DC

have legalized medical marijuana

Plus Washington, DC have legalized recreational marijuana

Medical Marijuana Recreational Marijuana


Federal Activity

Marijuana is an illegal Schedule I drug

August 2016 Currently

Controlled Substances Act

Current Administration

Unclear as to what will happen

2017 and Beyond

Federal funds will not be used to prevent state implementation of medical marijuana laws

House Resolution 244

May 2017

Will not reclassify marijuana

US Drug Enforcement Administration

53


Employers can lawfully

terminate workers for

using marijuana outside

of work hours even

though the drug is

LEGAL in the state.

Colorado Supreme CourtCoats v. Dish Network (2015)

54


▪ An insurer MUST

reimburse a

“qualified” workers

comp claimant for the

cost of medical

marijuana to treat low

back pain

▪ Appealed to NM

Supreme Court:

Certiorari denied

New Mexico Court of AppealsVialpando v. Ben’s Automotive Services

and Redwood Fire & Casualty (2014)

55


An employer is required to

reimburse a “qualified”

claimant for medical

marijuana if the drug is

reasonable and

necessary medical

care for treatment of a

work injury.

New Mexico Court of AppealsMaez v. Riley Industrial (2015);

Lewis v. American General Media (2015)

56


Upheld decision that the

claimant’s use of medical

marijuana for pain

management of his

“debilitating condition”

constitutes reasonable

and necessary medical

treatment

Connecticut Workers’ CompensationCommission Decision

Petrini v. Marcus Dairy, Inc. and Gallagher Bassett Service (2016)

57


Maine WC Board:

▪ Noll v. Lepage Bakeries, Inc. and Cannon Cochran Management Services

▪ Bourgoin v. Twin Rivers Paper Co., LLC and Sedgwick CMS

Self-insured employer is to reimburse costs

for “reasonable and proper” use of

medical marijuana under state’s WC

and medical marijuana law

Maine WC Board Decisions (2016)58

58


Other Activity

▪ At least five states (Connecticut, Maine, Minnesota, New Jersey, and New Mexico) have allowed reimbursement for WC under certain circumstances

▪ Florida and North Dakota passed legislation in 2017 prohibiting payment of WC benefits for medical marijuana

▪ New Mexico

▪ Adopted a fee schedule to provide for reimbursement of medical marijuana to injured workers—effective January 1, 2016

▪ Introduced legislation (SB 371/HB 527) in 2017 requiring employers/carriers to pay for medical marijuana for injured workers—did not pass

59


▪ Is marijuana a safer alternative to opioids for pain management? Is it a less expensive alternative to other drugs?

▪When a state legalizes marijuana, what is the potential impact on neighboring states?

▪ Should states consider fee schedules for marijuana (like New Mexico)?

▪ How are appropriate dosage levels determined?

▪What is the impact on Medicare Set-Aside Allocations since marijuana is still illegal under federal law?

Questions Raised byWC Stakeholders

60


States are increasingly legalizing marijuana in some form for medical use.

Courts are increasingly dealing with contested cases of medical marijuana in the work environment.

Marijuana is still illegal under federal law and remains a Schedule I drug.

Legalization of Marijuana—Summary

61


62

62


Residual Market: Countrywide and New MexicoMary Fowler, NCCI


Where Does NCCI Provide Residual Market Services?

▪ As of January 2017, NCCI provides Plan Administration services in the following states:

▪ AK, AL, AR, AZ, CT, DC, GA, IA, ID, IL, KS, MS, NH, NM, NV, OR, SC, SD, TN, VA, VT, and WV

▪ Other Plan Services: DE, IN, and NC

▪ As of January 2017, NCCI provides Pool Administration services in the following states:

▪ National Pool: AK, AL, AR, AZ, CT, DC, DE, GA, IA, ID, IL, KS, NC, NH, NJ, NV, OR, SC, SD, TN, VA, VT, and WV

▪ New Mexico Pool

▪ Tennessee Reinsurance Mechanism

▪ Financial and Actuarial Services: MA and MI

64


Residual MarketVideo Excerpt

Jim Nau, General ManagerNCCI Residual Markets


New Mexico Total Residual Market Plan Estimated Premium Volume

Premium in $ Millions as of 12/31/2016

66

$13M

$8M

$6M $5M $6M

$9M

$16M $16M

$13M

$9M

$0M

$2M

$4M

$6M

$8M

$10M

$12M

$14M

$16M

$18M

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Policy Year

$ Millions


3.7%

5.6%

7.0%

6.0%

5.2%

0%

1%

2%

3%

4%

5%

6%

7%

8%

2012 2013 2014 2015 2016*

Calendar Year

New Mexico Residual Market SharePlan Premium as a Percentage of Direct Written Premium

67

*Preliminary


New Mexico Total Residual Market PlanPolicy Counts

As of 12/31/2016

68

3,521

2,818

2,392 2,221 2,135 2,210

2,657

3,018 2,923

2,558

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Policy Year


New Mexico Average Size Accounts forResidual Market Policies and

Estimated PremiumAs of 12/31/2016

69

PremiumRange

Policy Count % of Policies Total Premium % of Premium

Average Policy Size

$0–$2,499 2,014 78.7% $1,563,829 17.5% $776

$2,500–$4,999 199 7.8% $703,798 7.9% $3,536

$5,000–$9,999 166 6.5% $1,175,728 13.1% $7,082

$10,000–$19,999 98 3.8% $1,338,142 14.9% $13,654

$20,000–$49,999 56 2.2% $1,703,404 19.0% $30,417

$50,000–$99,999 17 0.7% $1,181,762 13.2% $69,515

$100,000–$199,999 7 0.3% $1,027,237 11.5% $146,748

$200,000+ 1 0.0% $268,225 3.0% $268,225

Total 2,558 100.0% $8,962,125 100.0% $3,504


New Mexico Residual Market Reinsurance Pool Net Operating Results

Estimated Net Operating Gain/(Loss)Projected to Ultimate as of 12/31/2016

70

$4,153

$3,519

$1,046

($2,376)

-$4,000 -$2,000 $0 $2,000 $4,000 $6,000

2013

2014

2015

2016

Operating Gain/(Loss) (000's)

Po

licy Y

ear


Residual Market Summary

▪ National

▪ Stable residual market share

▪ Manageable operating results

▪ Residual market premium declined slightly in 2016

▪ High levels of customer service satisfaction

▪ State

▪ Decline in premium volume

▪ Relatively stable residual market share

▪ Self-funded operating results

Please visit ncci.com for additional state and countrywide information.

71


Closing Remarks


Supplemental Information


Medical Benefits Constitute the Majority of Total Benefit Costs in New Mexico

Regional states are AZ, CO, TX, and UTBased on NCCI’s financial data

42%

38%

41%

58%

62%

59%

Indemnity Medical

74


New Mexico Indemnity and MedicalLoss Ratios

0.48

0.35

0.73

0.50

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

1.00

2008 2009 2010 2011 2012 2013 2014 2015

Loss

Rat

io

Policy Year

Indemnity Medical

Based on NCCI’s financial data through 12/31/2016 at current benefit level and developed to ultimate


Frequency (Claims/

Premium)

Medical Severity

(Loss/Claim)

MedicalLoss Ratio

(Loss/Premium)

Frequency (Claims/

Premium)

Indemnity Severity

(Loss/Claim)

Indemnity Loss Ratio

(Loss/Premium)

What Drives Indemnity and Medical Loss Ratios?


New Mexico Claim Frequency

Based on NCCI’s financial data through 12/31/2016 adjusted to a common wage level

26.3

13.1

0.0

5.0

10.0

15.0

20.0

25.0

30.0

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Fre

qu

en

cy p

er

Mill

ion

of

On

-Lev

ele

d P

rem

ium

Policy Year


New Mexico Average Indemnity Claim Severity

Based on NCCI’s financial data through 12/31/2016 for lost-time claims at current benefit level and developed to ultimate

27.2

18.4

26.7

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Ave

rage

Ind

em

nit

yC

laim

Sev

eri

ty (

$ '0

00

s)

Policy Year

Adjusted to Common Wage Level Actual

78


New Mexico Average Medical Claim Severity

Based on NCCI’s financial data through 12/31/2016 for lost-time claims at current benefit level and developed to ultimate

38.6

26.1

37.9

15.0

20.0

25.0

30.0

35.0

40.0

45.0

50.0

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Ave

rage

Me

dic

alC

laim

Sev

eri

ty (

$ '0

00

s)

Policy Year

Adjusted to Common Wage Level Actual

79


Current Average Voluntary Pure Loss Costs Using New Mexico’s Payroll Distribution

Based on the latest NCCI approved rates and loss costs in the various states

1.16

0.00

1.00

2.00

3.00

TX AR

WV

UT IN KS

OR

DC

AZ

NV

TN MS

NM SD OK

MD

NC

VA

MO HI

ID NE

NH AL

CO KY

LA IA FL RI

SC ME

GA

MT

AK IL VT

CT

CW

Pu

re L

oss

Co

sts—

All

Cla

sse

s

State


New Mexico Average Claim FrequencyFrequency per 100,000 Workers—All Claims

Based on NCCI’s Statistical Plan data

Total 3,347

Total 3,499

Total 4,183

Total 2,338

Total 3,764

770

593

945

604

630

2,577

2,906

3,238

1,734

3,134

0 500 1000 1500 2000 2500 3000 3500 4000 4500

NM

AZ

CO

TX

UT

Lost Time Medical Only


30.4

19.1

24.4

20.6

14.5

26.7

19.221.0

19.8

14.3

NM AZ CO TX UT

PY 2014 PY 2015

Average Indemnity Claim Severityin the Region

Lost-Time Claim Severity in $ Thousands

Based on NCCI’s financial data for lost-time claims at current benefit level and developed to ultimate


41.6

49.0

32.2

25.9

37.437.9

43.6

27.2 25.7

35.1

NM AZ CO TX UT

PY 2014 PY 2015

Average Medical Claim Severityin the Region

Lost-Time Claim Severity in $ Thousands

Based on NCCI’s financial data for lost-time claims at current benefit level and developed to ultimate


New Mexico Distribution of Claimsby Injury Type

Regional states are AZ, CO, TX, and UTBased on NCCI’s Statistical Plan data for jurisdiction/claim type combinations for which three or more cases exist

75%

78%

78%

15%

14%

13%

10%

8%

9%

0%

0%

0%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Medical Only Temporary Total Permanent Partial Fatal & Permanent Total


New Mexico Indemnity Loss Distributionby Injury Type


33%

27%

28%

57%

52%

54%

4%

4%

2%

6%

17%

16%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Temporary Total Permanent Partial Permanent Total Fatal


New Mexico Medical Loss Distributionby Injury Type


30%

25%

24%

47%

49%

55%

9%

11%

9%

13%

14%

12%

1%

1%

0%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Temporary Total Permanent Partial Permanent Total Medical Only Fatal


Glossary


▪ Assigned Risk Adjustment Program (ARAP)—An assigned risk market program that surcharges residual market risks based on the magnitude of their experience rating modification.

▪ Calendar Year (CY)—Experience of earned premium and loss transactions occurring within the calendar year beginning January 1, irrespective of the contractual dates of the policies to which the transactions relate and the dates of the accidents.

▪ Calendar-Accident Year (AY)—The accumulation of loss data on all accidents with the date of occurrence falling within a given calendar year. The premium figure is the same as that used in calendar year experience.

▪ Claim Frequency—The number of claims per unit of exposure; for example, the number of claims per million dollars of premium or per 100 workers.

88

Glossary


▪ Claim Severity—The average cost of a claim. Severity is calculated by dividing total losses by the total number of claims.

▪ Combined Ratio—The sum of the (1) loss ratio, (2) expense ratio, and (3) dividend ratio for a given time period.

▪ Detailed Claim Information (DCI)—An NCCI Call that collects detailed information on an individual workers compensation lost-time claim basis, such as type of injury, whether or not an attorney was involved, timing of the claim’s report to the carrier, etc.

▪ Direct Written Premium (DWP)—The gross premium income adjusted for additional or return premiums, but excluding any reinsurance premiums.

89

Glossary


▪ Indemnity Benefits—Payments by an insurance company to cover an injured worker’s time lost from work. These benefits are also referred to as “wage replacement” benefits.

▪ Loss Ratio—The ratio of losses to premium for a given time period.

▪ Lost-Time (LT) Claims—Claims resulting in indemnity benefits (and usually medical benefits) being paid to or on behalf of the injured worker for time lost from work.

▪ Medical-Only Claims—Claims resulting in only medical benefits being paid on behalf of an injured worker.

▪ Net Written Premium (NWP)—The gross premium income adjusted for additional or return premiums and including any additions for reinsurance assumed and any deductions for reinsurance ceded.

90

Glossary


▪ Permanent Partial (PP)—A disability that is permanent but does not involve a total inability to work. The specific definition and associated workers compensation benefits are defined by statute and vary by jurisdiction.

▪ Policy Year (PY)—The year of the effective date of the policy. Policy year financial results summarize experience for all policies with effective dates in a given calendar year period.

▪ Schedule Rating—A debit and credit plan that recognizes variations in the hazard-causing features of an individual risk.

▪ Take-Out Credit Program—An assigned risk program that encourages carriers to write current residual market risks in the competitive voluntary marketplace.

▪ Temporary Total (TT)—A disability that totally disables a worker for a temporary period of time.

91

Glossary


Appendix


NCCI’s Worker Compensation Resources

▪ Financial Aggregate Calls

▪ Used for aggregate ratemaking

▪ Statistical Plan for Workers Compensation and Employers Liability Insurance (Statistical Plan)

▪ Used for class ratemaking

▪ Detailed Claim Information

▪ In-depth sample of lost-time claims

▪ Policy Data

▪ Policy declaration page information

93


Financial Aggregate Calls

▪ Collected Annually

▪ Policy and calendar-accident year basis

▪ Statewide and assigned risk data

▪ Premiums, Losses, and Claim Counts

▪ Evaluated as of December 31

▪ Purpose

▪ Basis for overall aggregate rate indication

▪ Research

94


Policy Year Financial Aggregate Data

1/1/2013 12/31/20131/1/2012 1/1/2016 12/31/2016

Policy Expiration Date

Policy Effective Date

Policy Year2012

Policy Year2013

Policy Year2016


Calendar-Accident Year Financial Aggregate Data

1/1/2014 12/31/20141/1/2013 1/1/2017 12/31/2017

Policy Expiration Date

Policy Effective Date

Calendar-Accident

Year2013

Calendar-Accident

Year2014

Calendar-Accident

Year2017


Statistical Plan for Workers Compensationand Employers Liability Insurance

(Statistical Plan) Data

▪ Experience by Policy Detail

▪ Exposure, premium, and experience rating modifications

▪ Individual claims by injury type

▪ Purposes

▪ Classification relativities

▪ Experience Rating Plan

▪ Research

97


Valuation of Statistical Plan Data

98

PolicyEffective

18 Months

1stReport

Valuation

2ndReport

Valuation

3rdReport

Valuation

4thReport

Valuation

5thReport

Valuation

30 Months42 Months

54 Months66 Months

New Mexico - National Council on Compensation Insurance · Guest Speaker: Darin hilders, New Mexico...

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Transcript of New Mexico - National Council on Compensation Insurance · Guest Speaker: Darin hilders, New Mexico...